Problem:
The Maximum Corporation has just completed the second year of a three-year MACRS recovery period for a piece of equipment it originally purchased for $500,000. Three-year MACRS schedule is as below.
|
Year 0
|
Year 1
|
Year 2
|
Year 3
|
|
MACRS Schedule:
|
33.33%
|
44.45%
|
14.81%
|
7.41%
|
Required:
Question 1: What is the book value of the equipment?
Question 2: If Maximum Corp sells the equipment today for $45,000 and its tax rate is 30%, what is the after-tax cash flow from selling it?
Note: Provide thorough explanation of the given question.